Magma Energy’s market cap expected at about US$ 295 million

Alexander Richter 14 Jun 2009

Magma Energy Corp's planned IPO, expected market capitalization and the sudden boost to the geothermal sector in the U.S. and Canada, e.g. as seen with the stock price increase for U.S. Geothermal, is described in this recent article.

In a recent news article on “Beatty makes splash in geothermal sector after years in copper and silver firms”, it is looked at the prospect of Magma Energy Corp.’s IPO in Canada.

Without wanting to provide the whole content of the article here, which makes indeed very interesting reading, I am highlighting some of the content here.

“With Magma Energy Corp working on the pricing for its IPO, analysts expect the share price offering to be between US$ 1.25 and 1.75, raising at least US$ 50 million, which could bring the company’s market capitalization to about US$ 295 million, according to Clarus Securities Inc.”. But some analysts, so the article, predict this to be higher mostly to the stimulus package incentives and the boost the geothermal sector received through it.

Magma currently owns the Soda Lake operating geothermal plant, which has about 23 megawatts of capacity. It is operating at about one-third that rate today, but the company has plans to double that production this year.

Magma also has 19 exploration properties in Argentina, Chile, Nicaragua, Peru, and the western U.S., with an asset portfolio said to total 199 MW of capacity.

Magma will be a junior player in the field when compared to giant such as industry leader Nevada-based Ormat Technologies Inc. (NYSE:ORA), which has built more than 1,200 MW of power plants, and even Idaho-based U.S. Geothermal (TSX:GTH).

Vargas of Clarus Securities said the pending Magma public offering shows U.S. Geothermal is “undervalued.”

“We expect Magma’s IPO to provide additional support for our thesis regarding GTH (U.S. Geothermal). Both companies have proven land resources and management teams with strong track records,” she wrote in a recent note to clients.

U.S. Geothermal, which has fewer exploration properties than Magma, has seen its stock quadruple from 46 cents on the TSX in December to more than $2.”

Vargas said Magma has a pre-IPO market capitalization of about $204 million based on 163 million shares outstanding at an estimated price of $1.25 per share. She also said the company has $11.6 million in cash and no debt.

Magma, which Beaty started in January 2008, has been busy expanding and raising cash for its expansion, not to mention the pending IPO.

In the past 14 months, the company has bought 21 properties with more than 200 hectares of geothermal rights in five countries at various stages of exploration.

Recent deals include buying the Glass Buttes project in Oregon, the Whitehorse property in Nevada, additional land near its Soda Lake operation in Nevada, and additional concession applications in Chile.

Earlier this year the company also raised nearly $29 million through an equity offering.”

Source: Canadian Press